White Sugar #5 Futures Market News and Commentary
March NY world sugar #11 (SBH19) on Friday closed up +0.18 (+1.40%) and March ICE London white sugar (SWH19) closed up +4.70 (+1.35%). Sugar prices moved higher Friday after crude oil prices rallied to a 1-1/2 month high. Stronger crude oil prices are positive for ethanol prices and provide incentive to Brazil's sugar mills to divert more cane crushing toward ethanol production rather than sugar production, thus reducing sugar supplies. Mar NY sugar climbed to a 2-1/4 month high Wednesday on signs that sugar exports from India, the world’s second-biggest sugar producer, may ease after India's Prime Minister's Office said it is considering raising the minimum selling price of sugar to 31 rupees/kg from 29 rupees/kg, which may curb India's sugar exports. Also, researcher Marex Spectron cut its India 2018/19 sugar export estimate to 2.8 MMT from a Nov estimate of 3.0 MMT. Sugar prices still have support from Tuesday's data from Unica showing that 2018/19 Brazil Center-South sugar production through December was down -26.5% y/y at 26.339 MMT. On the bearish side is Brazil shipping data showing that sugar awaiting loading in Brazil's ports rose to 586,400 MT as of Jan 16, up from last week's level of 382,113 MT. Also, Brazil's hydrous ethanol prices fell for a second week to 1.6354 real per liter in the week ended Jan 11, down -12% y/y and the lowest for this time of year in 3 years, which may prompt Brazil's sugar producers to divert more cane crushing toward sugar production with the lower ethanol prices.Big Picture Sugar Market Factors: Bullish factors for sugar include (1) Conab's hike in its Brazil 2018/19 ethanol production estimate to a record 32.2 bln liters (+18.6% y/y), citing the action by Brazil's sugar millers to divert less cane juice to produce sugar as global sugar inventories are seen rising and prices are falling, (2) concern about smaller global production after Unica forecasted that Brazil's Center South 2018/19 sugar production will fall -28% y/y to 26 MMT, and (3) signs that sugar exports from India, the world’s second-biggest sugar producer, may ease after India's Prime Minister's Office said it is considering raising the minimum selling price of sugar to 31 rupees/kg from 29 rupees/kg, which may curb India's sugar exports. Bearish factors include (1) ISO's forecast that global 2018/19 sugar production will rise +0.6% y/y to a record 185.2 MMT and that there will be a 2018/19 sugar surplus of 2.2 MMT (vs 2017/18's 7.3 MMT), (2) USDA's FAS forecast for 2018/19 sugar production in India, the world's second-largest sugar producer, to climb +5.2% y/y to a record 35.87 MMT, (3) record sugar output from Thailand, the world's fourth-largest sugar producer, after the Thailand Office of Cane and Sugar Board reported that Thailand 2017/18 sugar production rose to a record 14.47 MMT, (4) the recent plunge in crude oil prices to a 17-month low, which is negative for ethanol prices and may prompt Brazil's sugar mills to divert less cane to making ethanol, thus increasing sugar supplies.